Thinking big... £1.8bn trust built around America’s mega stocks

INVESTMENT trust JPMorgan American is on a roll. Over the past year, it has provided shareholders with attractive returns of 36 per cent from a portfolio principally built around 40 mega stocks listed in the United States.

Although the £1.8 billion trust has benefited from the investment euphoria surrounding artificial intelligence (AI), it is no one-trick pony. As well as holding some of the big tech stocks such as Microsoft (its biggest holding), Meta and Nvidia, the managers are not averse to investing in more ‘traditional’ businesses if their share prices appear to represent outstanding long-term value for money. The trust also has six per cent of its assets invested in more than 200 smaller companies.

‘It’s a diversified and dynamic portfolio,’ says Felise Agranoff, one of four managers who decides the composition of the fund’s assets.

‘It’s a blend of our very best investment ideas. We’re not wedded to any one investment style which means we can find opportunities right across the market.’

The only condition that the managers must adhere to – laid down by the trust’s board – is that exposure to smaller companies must not exceed 10 per cent. Currently, the trust holds 20 large growth stocks and 20 large value stocks, although the former represent the biggest collective position.

Agranoff says top 10 holdings such as Microsoft and Meta are ‘high conviction’ plays on the rise of AI. She describes Microsoft as an ‘early AI leader’ and says Meta has been brilliant at using AI to develop targeted advertising.

The trust also has positions in lesser-known companies that are benefiting from the AI boom. They include Trane Technologies, which builds the systems needed to ensure the huge data centres that AI relies upon are kept sufficiently cool.

It also has a stake in Quanta Services, which is helping to build the electric power infrastructure necessary to support AI.

The fund does not hold all the big US tech stocks. For example, it no longer has a stake in electric car manufacturer Tesla. ‘We sold it earlier this year,’ says Agranoff. ‘Demand for electric cars in the US has been disappointing. Yes, Tesla has a strong market position, but the market is becoming more competitive and more political.’

It also has underweight positions in both Apple and Alphabet, while it has recently taken some profits from its holding in Nvidia.

Among the value stocks it holds is EOG Resources, one of the US’s largest oil and gas exploration companies.

‘It’s a high-quality company operating in a sector of the stock market that has been out of favour with investors,’ says Agranoff. ‘It’s a low-cost operator and its shares are attractively valued.’

Other key holdings are healthcare company Kenvue which was recently spun out of pharmaceuticals giant Johnson & Johnson – and real estate company Regency Centers, which has done especially well from the development of outdoor malls in Florida.

The trust’s ongoing charges are competitive at 0.38 per cent and, unlike most rivals, its shares do not trade at a big discount to the value of underlying assets. The stock market identification code is BKZGVH6 and the market ticker JAM.

Although it pays dividends twice a year, they are minimal, equivalent to 0.8 per cent a year.

The trust’s management team will change next year when Jonathan Simon retires. But the impact on shareholders will be minimal.

‘We have a deep investment bench here,’ says Agranoff.

Eytan Shapiro and Lawrence Playford, both small cap specialists, make up the current team.